Walmart Inc. has agreed to buy a majority stake in Flipkart Group, India’s leading e-commerce platform, for $16 billion. The investment marks the retailer’s largest and potentially riskiest acquisition to date in a direct blow against Amazon, which reportedly made a rival bid in early May.
Walmart said Wednesday that it would buy an initial 77% stake in Flipkart, while the remainder of the business will be held by the company’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Ltd., Tiger Global Management LLC and Microsoft Corp. The transaction is expected to close later this year, subject to Indian regulatory approval.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market,” Walmart President and CEO Doug McMillon said in a statement. “Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”
The retailer’s investment includes $2 billion of new equity funding, which will support Flipkart’s mission to serve customers and grow its business. Walmart and Flipkart are also in talks with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. The retailer said it supports Flipkart’s goal to become a publicly listed, majority-owned subsidiary.
If the transaction closes at the end of the retailer’s second quarter, it will reduce Walmart’s fiscal year earnings per share by $0.25 to $0.30, which includes incremental interest expense related to the investment.
The deal provides Walmart with a leg-up in a market of more than 1.3 billion people, in which Amazon is rapidly growing since it arrived in India five years ago.
"Amazon already has a substantial foothold in India at 27% market share, and Walmart knew they needed to get into that market prior to Amazon either acquiring Flipkart or taking market share away," says Dan Neiweem, co-founder and principal at Avionos. "By acquiring Flipkart, Walmart has become the leader in e-commerce in India. Amazon has committed $5.5 billion to India, so it was only a matter of time before they took over as the leader. If Walmart didn’t make this move now, they would likely spend way more to get into the market."
Founded in 2007 by two former Amazon employees, Flipkart has become an emerging leader in electronics, appliances, mobile, fashion and apparel, leveraging a powerful technology foundation that includes artificial intelligence.
This investment combines Walmart’s omnichannel retail experience with Flipkart’s technology and Indian consumer insights, representing a unique opportunity in a market with significant long-term growth prospects in which Walmart expects e-commerce to grow at four times the rate of overall retail. Flipkart’s supply chain arm, Ekart, serves more than 800 cities, making 500,000 deliveries daily. In the fiscal year ended March 31, Flipkart recorded GMV of $7.5 billion and net sales of $4.6 billion, representing more than 50% year-over-year growth.
“This investment aligns with our strategy, and our goal is to contribute to India’s success story as we grow our business,” Walmart International President and CEO Judith McKenna said in a statement. “Over the last 10 years, Flipkart has become a market leader by focusing on customer service, technology, supply chain and a broad assortment of products. With Flipkart and the other shareholders who have come together, we will continue to advance the winning e-commerce ecosystem in India.”
The companies said they will maintain distinct brands and operating structures following the acquisition. Walmart India currently operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India. Walmart India President and CEO Krish Iyer will continue to lead that part of the business.
"Amazon is cloning itself in India, while Walmart goes for an acquisition," says Nicolas Avila, VP of technology at Globant. "The overall experience of Walmart in the U.S. relies a lot on their physical retail presence. Merging this experience with a pure digital player like Flipkart will be challenging but very important to cement Walmart's ability to land in more regions in the future. This acquisition should not only help keep Amazon in check, but it will be interesting to see how much of Flipkart's buying experience is incorporated to Walmart worldwide, and vice versa."
As Walmart scales in India, the company said it will continue to partner to create sustained economic growth across agriculture, food and retail, with future investments supporting job creation, small businesses, farmers and food waste reduction.